Banks must go digital or die, says the chairman of Spain's second-largest lender.

Francisco Gonzalez, who has been warning for almost a decade of the technological transformation set to engulf the financial industry, said at the Mobile World Congress in Barcelona March 4 that his bank would define itself as a software company.

Banco Bilbao Vizcaya Argentaria SA has spent about 3.2 billion euros ($3.6 billion) on technology since 2011 to expand online and mobile-banking services and prepare for what Gonzalez has described as an existential threat from firms like Google Inc., Facebook Inc. and Amazon Inc.

"The greater part of banks — thousands of banks — is going to disappear slowly in coming years," he said last month at BBVA's earnings press conference. When one of the Internet giants jumps into banking, "many people are going to realize what we're talking about, that there's a revolution going on," said Gonzalez, 70, who declined to comment for this article.

The bank is investing in financial technology firms such as Coinbase Inc., a provider of digital wallets for spending and receiving bitcoins, and cloud computing startup Madiva Soluciones. Last year it bought Portland, Oregon-based Simple in a deal valuing the digital banking company at $117 million.

"We are turning a bank into a digital house — it's a long journey," Gonzalez said today. "If you don't have the right tools, you can't compete."

The investments differentiate BBVA from competitors, even if they haven't made much difference to the bottom line yet, said Arturo Bris, a professor at the Lausanne-based IMD business school.

"The future is about big data, Bitcoin, so many things that we don't even know if they exist now," Bris said by phone. "There isn't a direct impact on the bank's results, that will take time to happen, but it will happen."

Angel Cano, BBVA's chief operating officer, attributed a drop in costs at the Spanish unit last year in part to the bank's digital push. Not everyone is persuaded the effort will bear fruit.

"So far, this is the only tangible benefit of the bank's digital strategy," said David Vaamonde, an analyst at MainFirst Bank in Madrid who rates the stock neutral. "In our view, the market is still somewhat skeptical of what the bet on technology will mean for BBVA."

As long as Gonzalez is in charge, the push will continue. He's been chairman since 2000 and has said he'll stay at the helm until the digital transformation is well underway.

Banco Santander SA, the largest Spanish lender, has begun talking about its own digital ambitions. Chairman Ana Botin, 54, who took over from her father last year, said at her first annual earnings presentation in February that she wants to transform Santander into a technological player.

More than half of CEOs at banks and capital-market firms see tech companies and other financial newcomers as a threat, almost double the portion last year, according to an annual survey published by PwC last month.

In remarks last year, Gonzalez said the important decisions in digital banking were made seven years before, when BBVA began its transformation. He likened the emergence of new digital companies to the so-called Cambrian Explosion about 540 million years ago when life forms on earth multiplied and evolved rapidly.

BBVA set up a digital banking division last year, headed by Carlos Torres Vila, to use technology to make the bank more efficient and increase its appeal to consumers.

The bank has an innovation center in a former palace in Madrid where business strategists sit in open workspaces near film-set style models of shops and streets that simulate environments where customers are using the bank's services.

Part of the bank's effort is to mine data gathered from customers to target them with products and services, without breaching client confidentiality.

"Any major bank will be able to buy technology, but if you are ahead on the learning curve like BBVA is you will know how to apply it," said Ricardo Wehrhahn, a Madrid-based managing partner at Intral Strategy Execution, a banking and business consultant.

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